What changed in this filing

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Item 1A. Risk Factors

2022-03-17 compared with 2021-03-31 · 60 added, 47 removed, 220 unchanged (33% of the section changed)

3 unchanged sentences

Product Approval and Monitoring

Many countries where we sell medical devices subject our technologies to their own approval and other regulatory requirements regarding performance, safety, and quality.

Most countries where we sell medical devices subject our technologies to their own approval and other regulatory requirements regarding performance, safety, and quality.

The global regulatory environment is increasingly unpredictable and stringent.

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Without reconciling the data, we may be unable to "lock" the trial database, an essential step that precedes the analysis of the data.

We rely on regular interaction and guidance from the FDA, European Medicines Agency (EMA), and other regulatory bodies to plan research and development activities across all stages.

Due to the COVID-19 pandemic, the FDA and worldwide regulatory bodies have a great deal of resources dedicated to COVID-19 related matters, resulting in disruption in their ability to fully support the regulatory approval process.

As resources continue to be diverted, regulatory approvals will more and more become non-essential matters until the pandemic is under control.

Delays of approvals, clearances, inspections, and meetings are currently being experienced and will continue for the foreseeable future.

We rely on regular interaction and guidance from the FDA and other regional/country regulatory authorities/agencies to plan research and development activities across all stages.

Due to the COVID-19 pandemic, the FDA and worldwide regulatory authorities have a great deal of resources dedicated to COVID-19 related matters, resulting in disruption in their ability to fully support the regulatory clearance/approval processes.

As resources continue to be diverted, regulatory clearances/approvals may continue to be delayed, until the pandemic is under control.

Therefore, delays with approvals, clearances, inspections, and meetings that are currently being experienced may continue for the foreseeable future.

Postponement of these interactions could delay us from bringing new products to market.

We are subject to costly and complex laws and governmental regulations and any adverse regulatory action may materially adversely affect our financial condition and business operations.

As a part of the regulatory process of obtaining marketing clearance for new products and new indications for existing products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints.

Unfavorable or inconsistent clinical data from existing or future clinical trials, or the market’s or FDA’s perception of this clinical data, may adversely impact our ability to obtain product approvals, our position in, and share of, the markets in which we participate.

As a part of the regulatory process for obtaining marketing clearance or approval for new products and new indications for existing products, we conduct and participate in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints.

Unfavorable or inconsistent clinical data from existing or future clinical trials, or the market’s or FDA’s perception of these clinical data, may adversely impact our ability to obtain product approvals, our position in, and share of, the markets in which we participate.

We cannot guarantee that we will be able to obtain or maintain marketing clearance for our new products or enhancements or modifications to existing products, and the failure to maintain approvals or obtain approval or clearance could have a material adverse effect on our business, results of operations, financial condition and cash flows.

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APYX MEDICAL CORPORATION

On March 14, 2022, the FDA posted a Communication that warns consumers and health care providers against the use of our Advanced Energy products outside of their FDA-cleared indications for general use in cutting, coagulation, and ablation of soft tissue during open and laparoscopic surgical procedures.

We continue to work with the FDA towards securing 510(k) clearance for additional indications.

We are in the process of evaluating what effects, if any, the Communication will have on our results of operations, cash flows and financial position.

Before and after a product is commercially released, we have ongoing responsibilities under the U.S.

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The results of these audits can include major inspectional observations, warning letters, or other forms of enforcement.

If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical products are ineffective or pose an unreasonable health risk, they could ban such medical products, seize adulterated or misbranded medical products, order a recall, repair, replacement, correction, or refund of such products, refuse to grant pending pre-market approval applications, refuse to issue export certificates for foreign governments, or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health.

If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical products are ineffective or pose an unreasonable health risk, they could ban such medical products, determine that our products are adulterated or misbranded, order a recall, repair, replacement, correction, or refund of such products, refuse to grant pending pre-market clearances or approvals, refuse to issue export certificates for foreign governments, or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health.

The FDA and other non-U.S.

government agencies may also assess civil or criminal penalties against us, our officers or employees and impose operating restrictions on a company-wide basis.

The FDA may also recommend prosecution to the Department of Justice.

The FDA may also recommend prosecution to the U.S.

Department of Justice.

Any adverse regulatory action, depending on its magnitude, may restrict us from effectively marketing and selling our products and limit our ability to obtain future pre-market clearances or approvals, and could result in a substantial modification to our business practices and operations.

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The competent authorities of the EU countries separately regulate the clinical research for medical devices and the market surveillance of products once they are placed on the market.

A new Medical Device Regulation ("EU MDR") was published by the EU in 2017, which imposes significant additional premarket and postmarket requirements.

A new Regulation (EU) 2017/745 on medical devices, or "EU MDR", came into effect in May 2017, which imposes significant additional premarket and postmarket requirements.

The EU MDR represents the first major changes to the EU medical device regulatory environment, has significantly raised the compliance bar for the medical device industry, and will cause significant changes to the regulatory obligations of manufacturers, importers and distributors involved in the medical device distribution chain.

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Outside of the EU, regulations vary significantly from country to country and are becoming increasingly stringent and country specific.

Territories and countries around the world continue to develop their own unique regulatory requirements, and these individual governments are passing laws that enforce these new regulations, and also impose fees, to register products in their country.

Territories and countries around the world continue to develop their own unique regulatory requirements, and these individual governments are passing laws that enforce these new regulations, including imposing fees, to register products in their country.

The time and effort required to obtain approval to market products may be longer or shorter than that required in the U.S.

Certain European countries outside of the EU, and other countries around the world do not recognize the CE mark certification or FDA clearance and have their own regulatory requirements to register and sell products in these territories.

Environmental Regulation

Certain European countries outside of the EU, and other countries around the world do not recognize the CE mark certification or FDA clearance/approval and have their own regulatory requirements to register and sell products in these territories.

APYX MEDICAL CORPORATION

Environmental Regulation

The medical device industry continues to be the subject of intense scrutiny and stringent regulation and the demand for green, sustainable products is rapidly increasing.

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Foreign Corrupt Practices Act, or the FCPA, and other federal statutes and regulations, including those established by the Office of Foreign Assets Control, or OFAC.

In addition, other foreign statutes, such as the U.K.

Bribery Act of 2010, or the Bribery Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors.

In addition, other foreign statutes, such as the

APYX MEDICAL CORPORATION

We have implemented policies and procedures designed to ensure compliance by our directors, officers, employees, representatives, consultants and agents with the FCPA, OFAC restrictions, the Bribery Act and other export control, anti-corruption, anti-money-laundering and anti-terrorism laws and regulations.

Bribery Act of 2010, or the Bribery Act, prohibits both domestic and international bribery, as well as bribery across both private and public sectors.

However, there can be no assurance that our policies and procedures are or will be sufficient to prevent violations from occurring.

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New and improved products play a critical role in our sales growth.

We continue to place emphasis on the development of proprietary products, such as our J-Plasma®/Renuvion® technology, and product improvements to complement and expand our existing product lines.

We continue to place emphasis on the development of proprietary products, such as our Renuvion®/J-Plasma® technology, and product improvements to complement and expand our existing product lines.

We maintain close working relationships with physicians and medical personnel in hospitals and universities who assist in product research and areas of development.

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However, we cannot guarantee that any of our previous or future investments in both facilities will be successful or that our new products will gain market acceptance, the failure of which would have a material adverse effect on our business and results of operations.

The amount expended by us on research and development of our products during the years 2020 and 2019, totaled approximately $3.9 million and $3.7 million, respectively.

The amount expended by us on research and development of our products for the years ended December 31, 2021 and 2020, totaled approximately $4.3 million and $3.9 million, respectively.

We have invested substantial resources in the development and marketing of our Advanced Energy product technologies but have not incurred any direct costs relating to environmental regulations or requirements.

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Our ability to successfully commercialize our products will depend on a number of factors, any of which could delay or prevent commercialization, including:

• our inability to obtain the necessary regulatory clearances or approvals for expanded indications, new products, or product modifications;

• we are unable to demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;

• our inability to obtain the necessary regulatory clearances or approvals for expanded indications, new products, or

APYX MEDICAL CORPORATION

• our product is determined to be ineffective or unsafe following approval, and is removed from the market or we are required to perform additional research and development to further prove the safety and effectiveness of the product before re-entry into the market;

• the regulatory approvals of our new products are delayed or denied, or we are required to conduct further research and development of our products prior to receiving regulatory approval;

• we are unable to build and maintain a sales and marketing group to successfully launch and sell our new products;

• we are required to allocate available funds to litigation matters;

• the needs of our physicians or their patients are not sufficiently met;

• we are unable to manufacture the quantity of products needed, in accordance with quality manufacturing standards, to meet market demand;

product modifications;

• our inability to demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;

• if our product is determined to be ineffective or unsafe following approval, and is removed from the market or we are required to perform additional research and development to further prove the safety and effectiveness of the product before re-entry into the market;

• if the regulatory approvals/clearances of our new products are delayed or denied, or we are required to conduct further research and development of our products prior to receiving regulatory approval;

• our inability to build and maintain a sales and marketing group to successfully launch and sell our new products;

• if we experience sudden or extreme volatility in commodity prices and availability, including supply chain disruptions;

• if we are required to allocate available funds to litigation matters;

• if the needs of our physicians or their patients are not sufficiently met;

• if we are unable to manufacture the quantity of products needed, in accordance with quality manufacturing standards, to meet market demand;

• competition from other products or technologies prevents or reduces market acceptance of our products;

• we do not have, and cannot obtain, the intellectual property rights needed to manufacture or market our products without infringing on another company’s patents;

• we are unsuccessful in defending against patent infringement, or other intellectual property rights claims, that could be brought against us, our products or technologies;

• if we do not have, and cannot obtain, the intellectual property rights needed to manufacture or market our products without infringing on another company’s patents;

• if we are unsuccessful in defending against patent infringement, or other intellectual property rights claims, that could be brought against us, our products or technologies;

The failure to successfully commercialize our products will have a material and adverse effect on the future growth of our business, financial condition and results of operations.

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Despite these efforts, however, any of these parties may breach those agreements and disclose our trade secrets and other unpatented or unregistered proprietary information, and once disclosed, we are likely to lose trade secret protection.

Monitoring unauthorized uses and disclosures of our trade secrets is difficult, and we cannot be certain that the steps we have taken to protect our intellectual property will be effective.

In addition, our remedies may not be sufficient to cover our losses.

Monitoring unauthorized uses and disclosures of our trade secrets is difficult, and we

APYX MEDICAL CORPORATION

cannot be certain that the steps we have taken to protect our intellectual property will be effective.

In addition, our remedies may not be sufficient to cover our losses.

In 2020, the Coronavirus outbreak was declared a pandemic by the World Health Organization and spread to the United States and many other parts of the world and may continue to adversely affect our business operations, employee availability, financial condition, results of operations and cash flows for an extended period of time.

The outbreak of COVID-19 continues to grow both in the U.S.

COVID-19 continues to exist both in the U.S.

and globally, and related government and private sector responsive actions may continue to adversely affect our business operations.

It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation continues to evolve.

Ongoing significant reductions in business-related activities could result in further loss of sales and profits, as well as other material adverse effects.

The extent of the impact of COVID-19 worldwide on our business, financial results, liquidity and cash flows will depend largely on future developments, including new information that may emerge concerning the severity and action taken to contain or prevent further spread within the U.S.

and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted.

It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, and its related variants, as the situation continues to evolve.

Future significant reductions in business-related activities could result in further loss of sales and profits, as well as other material adverse effects.

As COVID-19 continues and persists for an extended period of time, there may be significant and material disruptions to our supply chain and operations, and delays in the manufacturing and shipment of our products, which may have a material adverse effect on our business, financial condition, results of operations and cash flows.

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In the opinion of management, the Company has meritorious defenses, and such claims are adequately covered by insurance, or are not expected, individually or in the aggregate, to result in a material, adverse effect on our financial condition, results of operations and cash flows.

However, in the event that damages exceed the aggregate coverage limits of our policy, or if our insurance carriers disclaim coverage, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated financial position, results of operations and cash flows (see below ITEM 3:

However, in the event that damages exceed the aggregate coverage limits of our policy, or if our insurance carriers disclaim coverage, or if we are unable to obtain coverage on commercially reasonable terms, we believe it is possible that costs associated with these claims could have a material adverse impact on our consolidated financial position, results of operations and cash flows (see below ITEM 3:

Legal Proceedings ).

We rely on certain suppliers, subcontractors, and manufacturers for raw materials and other products and are vulnerable to fluctuations in the availability and price of such products and services.

Fluctuations in the price, availability and quality of the raw materials (including plastics and other petroleum-based materials, along with precious metals) and subcontracting services we use in our manufacturing could have a negative effect on our cost of sales and our ability to meet the demands of our customers.

Fluctuations in the price, availability and quality of the raw materials (including plastics and other petroleum-based materials, along with semi-conductors and precious metals) and subcontracting services we use in our manufacturing could have a negative effect on our cost of sales and our ability to meet the demands of our customers.

Inability to meet the demands of our customers could result in the loss of future sales.

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While we believe we could ultimately procure other sources for these components, should we experience any significant disruptions in this key supply chain, there are no assurances that we could do so in a timely manner which could render us unable to meet the demands of our customers, resulting in a material and adverse effect on our business and results of operations.

Our manufacturing facilities are located in Clearwater, Florida and Sofia, Bulgaria and could be affected due to multiple weather risks, including risks to our Florida facility from hurricanes and similar phenomena.

Our manufacturing facilities are located in Clearwater, Florida and Sofia, Bulgaria and could be affected by multiple weather

APYX MEDICAL CORPORATION

risks, most notably hurricanes in Clearwater, Florida.

Our manufacturing facilities are located in Clearwater, Florida and Sofia, Bulgaria and could be affected by multiple weather risks, most notably hurricanes in Clearwater, Florida.

Although we carry property and casualty insurance and business interruption insurance, future possible disruptions of operations or damage to property, plant and equipment due to hurricanes or other weather risks could result in impaired production and affect our ability to meet our commitments to our customers and impair important business relationships, the loss of which could adversely affect our operations and profitability.

We do, however, maintain a backup generator at our Clearwater facility, are working to establish deeper redundancies between both facilities, and have a disaster recovery plan in place to help mitigate this risk.

We do, however, maintain a backup power source at our Clearwater facility, are working to establish deeper redundancies between both facilities, and have a disaster recovery plan in place to help mitigate this risk.

Quality Management and Product Liability

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Many competitors in this industry are well-established, do a substantially greater amount of business, and have greater financial resources and facilities than we do.

We have invested and continue to invest, substantial resources to develop and monetize our J-Plasma®/Renuvion® technology.

We have invested and continue to invest, substantial resources to develop and monetize our Renuvion® technology into the cosmetic surgery market.

We believe we must continue to develop new applications for our products and obtain new indications for use in order to stay competitive.

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We may, in the future, identify deficiencies in controls over financial reporting.

While we have successfully remediated the control deficiencies that led to the material weaknesses reported in 2018 and 2019, as disclosed, in Part II, Item 9A, there can be no assurance that the remedial measures taken will prevent future control deficiencies or material weaknesses from occurring.

If we identify additional material weaknesses in our internal controls over financial reporting in the future, our ability to analyze, record and report financial information free of material misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC, will likely be adversely affected.

While we have concluded that, as of December 31, 2021, our disclosure and reporting controls were effective as included in Part II, Item 9A, there can be no assurance that future control deficiencies or material weaknesses will not be identified.

If we do identify additional material weaknesses in our internal controls over financial reporting in the future, our ability to analyze, record and report financial information free of material misstatements, and to prepare our financial statements within the time periods specified by the rules and forms of the SEC, may likely be adversely affected.

We are at risk of being the victim of a cyber-attack or a security breach that may expose confidential customer, product and Company data or compromise our internal IT infrastructure.

This could lead to liabilities resulting from failure to comply

This could lead to liabilities resulting from failure to comply with US and foreign data security and privacy regulations and negative impacts to our business operations.

APYX MEDICAL CORPORATION

with US and foreign data security and privacy regulations and negative impacts to our business operations.

We store in our computer systems and network various elements of data and information related to our customers, products and company that could be compromised as the result of a cyber-attack or security breach.

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We also rely heavily on our internal systems, network and data.

Any attacks on our IT infrastructure could have a significant impact on our daily manufacturing and customer service functions which could result in a material adverse impact on our financial results.

To date, we have not had any breaches against our systems and network, and we obtain cyber security insurance coverage on an annual basis.

However, any future attacks on our IT infrastructure could have a significant impact on our daily manufacturing and customer service functions which could result in a material adverse impact on our financial results, potentially in excess of our current coverage limits.

Our business is dependent on the security of our IT networks and those of our customers.

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Unresolved Staff Comments

We currently own and maintain a 60,000 square foot facility which consists of office, warehousing, manufacturing and research space located at 5115 Ulmerton Rd., Clearwater, Florida.

Apyx Bulgaria EOOD leases approximately 25,000 square feet of office, warehousing and manufacturing facilities located in Sofia, Bulgaria.

Legal Proceedings

See Note 17 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.

APYX MEDICAL CORPORATION

Mine Safety Disclosures

Not Applicable.

APYX MEDICAL CORPORATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors